Growing demand: South Shore rents are highest since dot-com era

Saturday

Oct 27, 2007 at 12:01 AMOct 27, 2007 at 9:51 AM

Landlords of high-end office properties in the Quincy-Braintree area are asking for rents not seen since the dot-com era, as even higher rents in downtown Boston and MetroWest drive tenants to buildings south of the city.

Steve Adams

Landlords of high-end office properties in the Quincy-Braintree area are asking for rents not seen since the dot-com era, as even higher rents in downtown Boston and MetroWest drive tenants to buildings south of the city.
Some landlords are seeking rents in the mid- to upper-$20-per-square-foot range. And those prices could be topped by a large speculative office project rising in Braintree, in a reflection of developer Thomas Flatley's faith in the market's continuing vitality.
``If the rents continue to grow, you'll see the whole trickle effect,'' said Rick Schuhwerk, an assistant vice president at commercial real estate brokerage Jones Lang LaSalle. ``The rents get so high in Boston, people want to go north, west or south.''
Braintree-based Flatley Co. is developing a 160,000-square-foot office building in Braintree Hill Office Park. The four-story building with panoramic harbor and skyline views is the priciest address on the South Shore, with asking rents of $30 per square foot. Flatley is marketing the $10.8-million property as a build-to-suit opportunity for tenants.
Landlords of two North Quincy office buildings are also looking for rents that were unheard of in recent years: HarborSouth Towers at 100 Hancock St. and 200 Newport Ave. are both seeking $27.50-per-square-foot rents.
Both properties could tempt companies seeking short drives from downtown Boston and access to the MBTA Red Line, said J.P. Plunkett, a senior director at Cushman & Wakefield. Similar properties in downtown Boston have rents that are approximately $10 per square foot higher.
``Boston firms are increasingly seeing that location as a cost-effective alternative for them,'' Plunkett said.
The average asking rent in the south suburban market was $20.39 per square foot at the end of September, according to Jones Lang LaSalle. Local office vacancy rates have risen slightly this year and hit 18.1 percent last month, according to Jones Lang LaSalle.
The biggest departure has been Blue Cross Blue Shield of Massachusetts, vacating the 183,000-square-foot Harbor Towers, as employees are being moved to other locations in Boston and the South Shore.
But industry sources say the uptick in vacancies is unlikely to continue.
Brendan Carroll, vice president of research for Richards Barry Joyce & Partners, said the South Shore looks attractive because rents are more than a third lower than those in the central portion of Route 128.
With rents about $10 per square foot lower in the Quincy-Braintree area, a company looking for 200,000 square feet of space stands to save $20 million on a 10-year lease.
``If you're a large user and you have the ability to save ($20 million) over 10 years, that is extremely compelling,'' Carroll said. ``That's really what people are thinking about and what's driving the Route 128 south (market).''
Landlords have scaled back incentive packages such as several months of free rent or building improvement packages, Plunkett said.
``The pendulum is no question going back toward the landlords,'' Plunkett said.
South Shore office parks attracted several major new tenants in the third quarter.
Insurance fraud prevention company MIB Group is in the process of moving its headquarters from Westwood to a 37,000-square-foot space at Braintree Hill Office Park.
MIB scouted properties along Route 128 from Waltham to Quincy before settling on Braintree Hill Office Park, said Meredith & Grew executive vice president James Elcock. The Braintree park won out because of amenities such as a fitness center, shuttle buses to public transportation, a day care center and jogging trails.
Some companies already entrenched in the market have sought larger spaces to accommodate growth.
BT Conferencing leased 72,000 square feet at 150 Newport Ave. in Quincy. Previously the company had occupied 40,000 square feet in Braintree Hill Office Park. About 300 employees moved to the new facility in July and August.
And demand for more space is expected to be steady heading into 2008. Companies are looking for an additional 4.7 million square feet of office space in the overall Boston suburban market, according to Jones Lang LaSalle.
The industrial market south of Boston also has strengthened this year. Vacancies have fallen from nearly 21 percent in the third quarter of 2006 to 17.5 percent in the third quarter of 2007.
That market has benefited from the entry of some new companies such as Bethpage, N.Y.-based mattress discounter Sleepy's, which subleased a 142,000-square-foot warehouse in Franklin formerly occupied by BJ's Wholesale Club.
Steve Adams may be reached at sadams@ledger.com.
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